Amazon Shopping Down Under: What We Know So Far

Amazon shopping is coming to Australia - and it aims to have stores in every Australian state by 2017. If you have shares in Coles or Woolworths you should be worried. If you own an independent grocery store you should be very worried. Here's everything we know about Amazon's shopping strategy and how it will affect they way we buy goods in Australia.

One of the world's biggest retailers, Amazon, is on track to launch bricks and mortar grocery stores and an online supermarket in Australia within two years. Amazon's stores would be smaller than a Woolworths or Coles, and similar in size to an Aldi store. It would stock only the items people like to inspect before purchasing, namely fruit and vegetables, meat, dairy and alcohol.

An Amazon supermarket would be different to a typical Australian supermarket, if it is built as once advocated by an executive supporting Amazon's grocery rollout globally, Brittain Ladd.

But customers would still be able to buys tens of thousands of products through an app or an instore kiosk or touchscreen.

These products would not be stocked on shelves. Instead, they would be stored in nearby fulfillment centres, for delivery to the customer's home.

Customers would also have the option of ordering groceries online and then using drive-thru lanes to pick up their groceries from the store.

This "multi-function" store design would increase sales per square metre — an important metric for retailers.

'Growth' Opportunity

Amazon.com Inc. was founded and is led by Jeff Bezos, one of the world's richest people and estimated by Forbes to be worth $US64 billion ($A84.7 billion).

The online giant has identified grocery as a growth opportunity and is expected to launch its grocery business in Singapore and South East Asia around the same time as launching in Australia.

Amazon has been in discussions with third-party logistics providers and private warehousing companies in Australia for months, but it's understood firm entry dates and store targets are yet to be decided for Australia and the rest of Asia.

Similarly, membership prices are yet to be decided.

Amazon Fresh

First, Amazon is expected to launch an Australian version of its Prime Now program, which provides free shipping to members on a huge range of products, ranging from groceries to hot meals.

When the retail giant is comfortable with its technology, distribution network and supplier deals, Amazon is then expected to launch Amazon Fresh, its online grocery delivery service that recently launched in the UK.

Amazon Fresh in the US stocks more than 500,000 products, compared with an average grocery retailer in Australia which stocks tens of thousands of products. Aldi sells about 1,350 grocery products.

It's also understood that Amazon expects to generate the majority of its sales from online orders initially. After a year, however, Amazon is believed to expect its physical stores to generate similar revenue as an average Aldi store.

$4 Billion In Sales Tipped

An August report by Citi's Australian retail analysts estimated Amazon could generate between $3.5 billion and $4 billion in Australian sales within five years of launching, assuming an entry within two years.

"This would be about 14 per cent of online retailing and 1.1 per cent of all retail sales in Australia (including food)," they said.

"Amazon Fresh would be a disruptive force on the Australian grocery market, but developing the supply chain and dealing with Australia's lower capital city population density makes entry more challenging.

"We expect Amazon would initially focus on its more successful general merchandise categories like electronics and toys."

Bricks And Mortar Are Back

In a 2013 piece written when he worked for Deloitte, Brittain Ladd recommended Amazon set up bricks and mortar stores to boost sales.

"Amazon Fresh will only succeed as a grocery retailer if they can sell more groceries, and selling more groceries requires attracting and delighting as many customers as possible through available channels," he wrote in a piece called A Beautiful way to save Woolworths.

​Amazon did not respond to a request for comment.

This article originally appeared in Business Day, the complete view of business published on Fairfax Media websites. Follow Digital Life on Facebook and Twitter.